GOVERNANCE

PHX Energy Services Corp. ("PHX Energy" or the "Company") believes that effective corporate governance is essential to creating long-term value for our shareholders. As such,  PHX Energy has adopted certain structures and procedures to ensure that effective corporate governance practices are followed. The following describes our approach to corporate governance. The Board of Directors (the "Board") of PHX Energy is responsible for the overall governance of the Company. The Board oversees the Company's business and affairs and the day-to-day conduct of business by executive management, establishes or approves all corporate policies as required and involves itself jointly with management in ensuring the long-term creation of shareholder value and the preservation and protection of the Company's assets. In addition to prescribed legal obligations, the Board bears primary responsibility for the following:

Corporate Code Of ConductWhistle Blowing ProceduresCorporate Disclosure, Confidentiality and Trading Policy.

 

The Board will take such actions as it deems appropriate to ensure:
 

  • the integrity of PHX Energy’s Chief Executive Officer, Chief Financial Officer and other members of the management of the Company; and

  • that a culture of integrity is created and maintained throughout the Company, its affiliates and in particular, the management team involved with PHX Energy.

 

Corporate Policies and Mandates
 
Corporate Policies and Mandates
 
Certificate of Incorporation
Adoption of a Strategic Planning Process

With respect to each fiscal year, the Board:

  • meets with management regarding the strategic planning for the Company in which future trends, opportunities and risks are jointly identified and discussed; and

  • considers and decides on a strategic plan which addresses such trends, opportunities and risks.
     

Management presents specific strategies and business plans to the Board which are then thoroughly discussed and considered by the Board. Capital expenditure projections for each fiscal year are reviewed and a budget is presented for approval. Updates on industry trends, product strategies and new technology developments, capital expenditures and specific problems are presented by management and discussed as part of a management report at each regular quarterly Board meeting.
 

Identification and Management of Risks

The Board will identify and review with management the principal business risks faced by the Company. In doing so, the Board may receive reports of management, and an assessment of, and proposed responses to, such risks as they develop. The Board will ensure the implementation of appropriate systems to manage these risks. The Board may delegate one or more Committees of the Board to receive management's assessment and responses and make recommendations and reports to the Board.
 

Succession Planning and Appointment, and Monitoring Executive Management

Through its review of all officer appointments, particularly that of the Chief Executive Officer, the Board is involved in management's succession and manpower planning. In reviewing and appointing executive officers, the Board will satisfy itself that candidates possess the necessary levels of integrity, skill and experience. The Board has delegated to the Compensation Committee the review with management of succession plans of the Chief Executive Officer and other key members of Corporate Management and to provide its reports and recommendations to the Board.
 

Communications Policy

The Board will ensure that the Company maintains a program to effectively communicate with its stakeholders, including shareholders, employees and the general public. As such the Company has in place a Corporate Disclosure, Confidentiality and Trading Policy which has been implemented to ensure compliance with applicable laws relating to corporate communications and disclosure by a public company.

Integrity of Internal Controls

The Board will ensure that effective systems are in place to monitor the integrity of the Company's internal control and management information systems. The Board may delegate to the Audit Committee responsibility to review the effectiveness of the systems and to monitor the Company's internal control and management information systems.
 

Approach of Corporate Governance and Governance Guidelines

The Board will develop the Company's system of an overall approach to corporate governance. The Board may delegate to the Nomination and Corporate Governance and Compensation Committee responsibility to review and make recommendations to the Board regarding the content and implementation of Corporate Governance guidelines and other related governance matters and process.
 

Board Size, Composition and Independence

Size - The Board shall consist of such number of directors within the range set forth in PHX Energy's Articles of Incorporation as the Board deems appropriate in order to facilitate effective and efficient decision making. The Board may delegate to the Nomination and Corporate Governance and Compensation Committee the responsibility of considering and making recommendations to the Board with respect to the size of the Board.

 

Composition - The Board shall consist of directors who represent a diversity of personal experience and background particularly amongst the outside directors. At a minimum, each director shall have demonstrated the highest personal and professional integrity; significant achievements in his or her field; experience and expertise relevant to the Company's business; reputation for sound and mature business judgment; the commitment to devote the necessary time and effort in order to conduct his or her duties effectively; and, where required, financial literacy.

 

Independence - A majority of PHX Energy's directors must be individuals who are not officers or employees of the Company or any of its affiliates, or individuals who are related to officers or employees of the Company or any related entities or any of their affiliates. In addition, a majority of PHX Energy's directors must be individuals who are free from any interests in any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director's ability to act with a view to the best interests of the Company, other than interests and relationships arising from shareholding and otherwise meet the independence requirements prescribed under applicable laws, rules and regulations, including the stock exchanges on which the Company's units are listed. The Board shall annually determine the independence of each director and may establish definitive independence guidelines.

 

The Board of Directors

Currently, our Board is composed of six directors. Five of the directors are presently deemed to be "unrelated or independent" pursuant to the Toronto Stock Exchange ("TSX") guidelines. Throughout our disclosure of corporate governance practices, we will use the term "independent" to denote both independent and unrelated. As noted above, the Board is charged with the overall stewardship of the Company and manages or supervises the business of the Company and its management. Specifically the Board's responsibilities include:

  • approving the annual audited financial statements of the Company;

  • recommending to the shareholders the appointment of the Company's external auditors;

  • reviewing, adopting and monitoring the Company's strategic planning process;

  • approving goals and objectives for the Company;

  • reviewing and approving the Company's operating budget;

  • ensuring policies and processes are in place for the identification of principal

  • business risks and reviewing and approving risk management strategies;

  • approving corporate policies and other corporate protocols and controls;

  • succession planning, including nominating and monitoring the CEO and senior management;

  • approving the Company's policy on public disclosure; and

  • ensuring the integrity of internal financial controls and reviewing management information systems.
     

In addition, the Board has the responsibility at all times to act in the best interest of the Company and its shareholders. The Board meets a minimum of four times per year and each scheduled board meeting is followed by a discussion of the independent directors without the presence of management. Directors assist in preparing the agenda for Board and committee meetings and receive a comprehensive package of information in advance of each meeting. The Board continually reviews its practices and procedures to ensure it follows corporate governance best practices. The current structures, policies and practices of the Board and its committees have enabled the Board to conclude that the Company is in full compliance with the Guidelines of Corporate Governance established by the TSX.

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